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Recovery from the Great Recession is
complete, but there are difficult unemployment and wage problems

As the largest economy in the world, the US
labor market is crucial to the economic well-being of citizens worldwide as
well, of course, that of its own citizens. Since 2000 the US labor market
has undergone substantial changes, both reflecting the Great Recession, but
also resulting from some striking trends. Most interesting have been a
remarkable drop in the labor force participation rate, reversing a nearly
50-year trend; the full recovery of unemployment from the depths of the
Great Recession; and the little-known continuing growth in post-inflation
average earnings.

Greater representation of women may better
represent women’s preferences but may not help economic performance

Women's representation on corporate boards,
political committees, and other decision-making teams is increasing, this is
in part because of legal mandates. Evidence on team dynamics and gender
differences in preferences (for example, risk-taking behavior, taste for
competition, prosocial behavior) shows how gender composition influences
group decision-making and subsequent performance. This works through
channels such as investment decisions, internal management, corporate
governance, and social responsibility.

Temporary government schemes can have a
positive economic effect

Government schemes that compensate workers for
the loss of income while they are on short hours (known as short-time work
compensation schemes) make it easier for employers to temporarily reduce
hours worked so that labor is better matched to output requirements. Because
the employers do not lay off these staff, the schemes help to maintain
permanent employment levels during recessions. However, they can create
inefficiency in the labor market, and might limit labor market access for
freelancers and those looking to work part-time.

Public education tends to crowd out parents’
time and money, but careful policy design may mitigate this

Many countries around the world are making
substantial and increasing public investments in children by providing
resources for schooling from early years through to adolescence. Recent
research has looked at how parents respond to children’s schooling
opportunities, highlighting that public inputs can alternatively encourage
or crowd out parental inputs. Most evidence finds that parents reduce their
own efforts as schooling improves, dampening the efficiency of government
expenditure. Policymakers may thus want to focus government provision on
schooling inputs that are less easily substituted.

Substance use reduces the academic performance
of university students

A non-trivial portion of traffic fatalities
involve alcohol or illicit drugs. But does substance use—which is linked to
depression, suicide, and criminal activity—also reduce academic performance?
Recent studies suggest that the consumption of alcohol has a negative effect
on the grades of university students. Likewise, there is evidence that
marijuana use reduces the academic performance of university students.
Although students who use illicit substances are more likely to drop out of
high school than those who do not, this may reflect the influence of other,
difficult-to-measure factors at the individual level, such as
personality.

Immigrants initially earn less than natives;
the wage gap falls over time, but for many immigrant groups it never
closes

Immigrants contribute to the economic
development of the host country, but they earn less at entry and it takes
many years for them to achieve parity of income. For some immigrant groups,
the wage gap never closes. There is a wide variation across countries in the
entry wage gap and the speed of wage assimilation over time. Wage
assimilation is affected by year of entry, immigrant skill, ethnicity, and
gender. Policies that facilitate assimilation of immigrant workers provide
support for education, language, and employment. Such policies can also
reduce barriers to entry, encourage naturalization, and target selection of
immigrants.

Where STEM immigrants were educated strongly
influences their economic success and possibly their impact on
innovation

Canada, the US, and most Western countries are
looking to STEM (science, technology, engineering, and mathematics)
immigrants to boost innovation and economic growth. Canada in particular has
welcomed many STEM immigrants over the past quarter of a century. In the US,
there is an ongoing debate about whether the H–1B visa program is being used
effectively to attract more STEM immigrants. Interestingly, significant
differences exist between the two countries in earnings and likely the
innovation activity of highly educated immigrants, which highlights the
likely role of immigration policy in determining such outcomes.

The institutional structure of pension systems
should follow population developments

For decades, pension systems were based on the
rising revenue generated by an expanding population (the so-called
demographic dividend). As changes in fertility and longevity created new
population structures, however, the dividend disappeared, but pension
systems failed to adapt. They are kept solvent by increasing redistributions
from the shrinking working-age population to retirees. A simple and
transparent structure and individualization of pension system participation
are the key preconditions for an intergenerationally just old-age security
system.

The right policies can help the self-employed to boost
their earnings above the poverty level and earn more for the work they do

A key way for the world’s poor to escape poverty is to earn
more for their labor. Most of the world’s poor people are self-employed, but because
there are few opportunities in most developing countries for them to earn enough to
escape poverty, they are working hard but working poor. Two key policy planks in the
fight against poverty should be: raising the returns to self-employment and creating
more opportunities to move from self-employment into higher paying wage employment.

Enforcement improves legal compliance, but its
impact on welfare is country specific and unclear

More than half of private sector employees in
the developing world do not receive legally mandated labor benefits. These
regulations have typically been enacted by democratically elected
governments, and are valued by both formal and informal workers. Increasing
public enforcement (e.g. inspections, fines, and workers’ access to the
judiciary) can be a powerful tool to reduce violations (e.g. increase the
number of employees earning above the minimum wage). Which factors determine
enforcement, and whether enforcement produces more social benefits than
costs, are, however, unanswered questions.